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Energy markets and financial analysis

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Public policies and technological advances are disrupting the dynamics of energy markets throughout North America. E3’s experts bring deep understanding of market drivers and institutions gained from decades of experience working with public and private sector decision makers.

E3 provides utilities, asset owners, project developers, investors, and technology companies with the data and insights they need to navigate this shifting landscape. We help our clients identify market opportunities, quantify future revenue streams, and make decisions about capital expenditures. Our approach to developing custom price forecasts goes beyond the conventional fundamentals-based models, incorporating knowledge gleaned from our work with policy makers and experience in assessing a wide range of energy technologies

Our energy markets and financial analysis services include:

  • Custom forward-market price projections
  • Asset valuation
  • Due diligence assessment
  • Site evaluation
  • Basis spread assessment
  • Debt-service coverage assessment
  • Impacts of policy and technology changes on market prices and asset values
  • Wholesale market rules and bidding strategies
  • Production simulation cost modeling

 

 

Energy markets and financial analysis projects

Evaluating benefits of regional market participation | Multiple utilities, 2014–present

E3 has completed studies for more than 10 utilities on the costs and benefits of participating in the western energy imbalance market (EIM), a regional 5-minute balancing market that became operational in 2014. The EIM aims to lower costs for consumers and assist states in meeting renewable energy goals through more-efficient dispatch, which reduces the need to carry costly reserves and curtail renewable generation. For each study, we ran a production simulation grounded in a detailed representation of the utility’s system. Our work has informed decisions by PacifiCorp, Arizona Public Service, NV Energy, and other utilities to join the EIM, as well as Chelan County Public Utility District’s decision not to participate. Consistent with E3 findings, the California ISO estimated that participants saved more than $85 million in the 20 months after the EIM became operational. Several more studies for utilities are under way.

Publications

Modeling benefits of the Western EIM | WECC, 2011

The Western Electric Coordinating Council (WECC) engaged E3 to model the benefits of implementing an energy imbalance market (EIM) across the Western Interconnection. Working with WECC staff and many stakeholders, we modeled and compared simulated production costs for a scenario that maintained existing operational arrangements and a second scenario with a consolidated regional balancing market. The analysis found benefits from improved system dispatch, as well as from reductions in operating reserves needed to accommodate wind and solar variability. E3 devised an innovative technique to more accurately estimate the potential impact of the EIM, and pioneered applying “hurdle rates” to calibrate the GridView production simulation base case so that it more accurately reflected bidding and dispatch practices in the West. Since presenting our findings to WECC in 2011, we have developed similar EIM cost-benefit studies for 10 additional utilities.

Publications

Valuation case for potential natural gas power plant acquisition | Large equity holder, 2013

E3 provided independent, comprehensive valuation and due diligence services to a client considering the acquisition of a natural gas power plant in the Pacific Northwest. We examined transmission options and associated costs, energy market revenue projections under various regulatory and environmental scenarios, capacity values, ancillary services revenues, and potential off-takers. Based on our low-valuation case, the buyer made the prudent decision not to acquire this plant.

Market assessment for wind project acquisition | Large equity holder, 2015

E3 advised a large private equity firm on a potential acquisition of nearly 1 GW of wind generation assets. This project tapped our deep understanding of the western grid, markets, and public policy. We applied our suite of models to project price trajectories for future renewable power purchase agreements, to assess the impact of renewable curtailment on asset values, and to weigh supply and demand for renewable energy credits under potential future regulation. Our analysis helped the company stress-test its internal valuation results and ultimately supported a successful bidding strategy and acquisition.

Market and financial analysis for $200 million storage investment | Macquarie Capital, 2016

Macquarie Capital turned to E3 for analysis and strategic advice on a potential investment in a 50 MW distributed storage project developed by Advanced Microgrid Solutions (AMS) in the Los Angeles Basin. We performed simulations to verify AMS’s internal modeling of the benefits, costs, and value proposition of behind-the-meter, customer-sited storage assets. To understand potential revenue streams over a 20-year period, E3 analyzed the storage project and the underlying business model, forecasting wholesale and retail electric markets. Our financial analysis for the investors and potential lenders was a key element of the due diligence leading to Macquarie’s $200 million financing arrangement with AMS to take ownership of the project.



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